The net debt issuances planned by the Treasury for this year will be 55 billion euros, a figure 15% lower than that of 2023 which, however, remains significantly above those recorded before the pandemic.
In his first appearance after the meeting of the Council of Ministers, the new Minister of Economy, Carlos Body, explained that the strategy to address these emissions will involve “prudence and flexibility to adapt to circumstances of high uncertainty.” Interest rates began to rise in mid-2022 and are now at 4.5%.
When referring to the buyers of Spanish debt, Body has highlighted the dynamism of foreign buyers and individuals. The former bought close to 40% of the debt last year, while the latter dedicated 21,000 million to the acquisition of Treasury bills, compared to just 3,000 million a year before.
Financing needs had been below 55 billion euros since 2015, until being reduced to 20 billion euros in 2019. However, the pandemic caused a rebound to 109.9 billion. Since that moment, the amount has been decreasing, but it is still far from pre-covid volumes.
The pressure is now exerted by the high interest rates of 4.5%, which are also gradually being transferred to the outstanding debt. Apart from new issues, each year, Corpo indicated, it is necessary to refinance between 12% and 14% of all debt, so the 450 basis point increase in interest rates has for the moment only become an increase of 45 basis points on the total.
The current cost of debt is now 1.86%, while its average life is 7.84 years, which gives room for abrupt increases in interest rates. At the end of 2021 it reached 7.99 years, which is the longest duration recorded at least since 2012.
Gross financing needs, which also include debt repayments, will amount to 257 billion euros this year, which is equivalent to about 17% of the total debt, a percentage similar to that of 2018.
The new minister explained that, thanks to lower issuance needs and economic growth, the debt-to-GDP ratio will be 106.3% at the end of 2024, compared to 108% in 2023. It will mean a drop of 19 points percentages in less than four years, from the maximum of 125.3% in 2021.
